Sydney, Nov 8 (BUS): Asian stock markets were mixed on Monday as risk assets found support from the upbeat US October jobs report, but faced another test later in the week from the US inflation reading that could scare the price horses.
Congressional passage of the long-delayed $1 trillion infrastructure bill has cheered investors, though a broader social safety net plan remains elusive, Reuters reports.
Data released over the weekend also showed that China’s exports beat expectations in October to post a record trade surplus, although the decline in imports added to evidence of slowing domestic demand.
The moves were modest as MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2%. Japan’s Nikkei lost early gains to fall 0.1%, away from a five-week high.
The blue Chinese flakes wobbled on either side of the flat, stuck in a range that lasted for about four months.
Nasdaq futures fell 0.4%, after 10 consecutive sessions of gains that left the index in an overextended state. S&P 500 futures are down 0.2%, EUROSTOXX 50 futures are down 0.1% and FTSE futures are flat.
Friday’s strong US payroll report included upward revisions for the past two months and another strong wage reading.
Labor market malaise combined with disruption in global supply chains should lead to another higher US consumer price reading on Wednesday, and any upward surprise is likely to revive talk of an earlier Fed hike.
Analysts note that an alternative measure of average core inflation has already risen significantly to 3.6% annually.
“Another acceleration in the annualized monthly CPI will reinforce our view that the Fed is behind the curve,” said Kim Mundy, chief economist and currency strategist at CBA.
“The longer the FOMC waits to tighten monetary policy, the more risky the FOMC will tighten to bring inflation back under control.”
At least six Fed officials are speaking on Monday, likely focusing on Vice President Richard Clarida speaking on Fed and European Central Bank policy.
After some violent volatility, Treasuries still managed to end last week higher, thanks in part to a big drop in UK bond yields as short-term debt enjoyed its best week since 2009 after the Bank of England missed an opportunity to rise.
This prompted the market to pause on the potential timing and pace of tightening not only there, but in Europe and the US as well. Federal funds now have a full rate hike by September 2022, instead of July, a second not until February 2023 instead of December 2022.
10-year Treasury yields fell 10 basis points over the week and were last at 1.47%.
The drop caused a little strength in the dollar, which reached its highest level in more than a year after the payroll data. The dollar index settled at 94.331 from a high of 94.634.
However, the surprise decision by the Bank of England left Sterling down by 1.4% over the past week and trading at $1.3473, while the Euro touched a 16-month low before settling at $1.1556.
The dollar was also trying to maintain its bullish run for the Japanese yen at 113.54, above the support around 113.25.
The decline in bond yields was a boon for gold, which does not offer a fixed yield, and lifted it to $1,818 an ounce.
Oil prices strengthened after OPEC+ producers rejected a US call to speed up production increases even as demand approached pre-pandemic levels.
Saudi Aramco also raised the crude’s official selling price to all buyers around the world.
Brent crude rose another $1.01 to $83.75 a barrel, while US crude rose $1.07 to $82.34.
HF